This will probably get me hit with an audit by the Internal Revenue Service, but here’s a modest proposal for a federal government struggling to cut the deficit: Next time Congress decides to stimulate home purchases and energy improvements with federal tax credits, could we make sure the IRS is on board and knows what the heck it’s supposed to do?

I say that having read the latest critical report — the fourth in a series by the Treasury’s Inspector General for Tax Administration — about IRS bungling on housing-related tax credits.

The latest audit, released July 25 with virtually no media coverage, found that the IRS had allowed taxpayers to file amended returns to receive more than one year’s worth of first-time home purchase tax credits — the $7,500 repayable maximum credit plus the nonrepayable maximum $8,000 credit.

Or to switch the year of purchase from 2008 — when you were supposed to pay the credit back over 15 years — to 2009 or 2010, when you didn’t have to.

That’s a neat game — claim credits two years running on a single home purchase, or get out of paying back money to the government that you agreed upfront to repay.

This will probably get me hit with an audit by the Internal Revenue Service, but here’s a modest proposal for a federal government struggling to cut the deficit: Next time Congress decides to stimulate home purchases and energy improvements with federal tax credits, could we make sure the IRS is on board and knows what the heck it’s supposed to do?

I say that having read the latest critical report — the fourth in a series by the Treasury’s Inspector General for Tax Administration — about IRS bungling on housing-related tax credits.

The latest audit, released July 25 with virtually no media coverage, found that the IRS had allowed taxpayers to file amended returns to receive more than one year’s worth of first-time home purchase tax credits — the $7,500 repayable maximum credit plus the nonrepayable maximum $8,000 credit.

Or to switch the year of purchase from 2008 — when you were supposed to pay the credit back over 15 years — to 2009 or 2010, when you didn’t have to.

That’s a neat game — claim credits two years running on a single home purchase, or get out of paying back money to the government that you agreed upfront to repay.

The IRS’ computer systems apparently weren’t set up to spot multiple claims using amended returns or the moving of purchase dates by taxpayers for their own advantage. In some cases, IRS staff simply entered the dates wrong.

The Inspector General also found some amended returns in which credits were paid out though there was no public record or documentation to support the taxpayer’s contention that he or she had ever signed a contract to purchase or had owned a home.

It gets worse. The July report followed up on an audit released in May that found that — based on a random sample of 5 million returns — 302,000 taxpayers who received $234 million in federal tax credits for home energy improvements showed no evidence of ever owning a house, much less installing new windows, insulation or anything else.

Some of the erroneous payouts went to inmates of prisons who could not have purchased or installed energy-saving equipment during the tax year in the opinion of the auditors. Credits apparently also were sent to claimants who turned out to be under 18 — even as young as three.

The July audit, bad as it was, followed a study by the Inspector General last fall that found that IRS computer programs processing claims for tax credits could not distinguish between houses purchased in 2008 and those purchased in 2009, which made the agency easy prey for people seeking the bigger and nonrepayable credit for first-time buyers in 2009 and 2010.

Out of 1.77 million filings for homebuyer credits for purchases in 2009, auditors found more than 73,000 returns that received credits but with dates of purchase that either were incorrect or could not be documented.

The same study identified 1,326 taxpayers who received a total of $10.1 million worth of credits whose home purchase dates turned out to be after the claimant’s death, according to Social Security records.

Dead people, prisoners, kiddies and other non-homeowners can apply for and receive homeowner tax credits? Apparently.

In fairness to the IRS, there were some mitigating circumstances, and there have been significant recoveries of funds. The latest Treasury audit pointed out that the creation and modification of housing purchase tax credit programs in four different pieces of emergency legislation presented "difficult challenges" to the IRS.

This was especially so because taxpayers were allowed to submit amended returns in order to speed up payments of the credit. All of the housing tax credit programs, whether for buyers or energy improvers, were economic stimulus measures intended to pump money into the system quickly.

The IRS, in other words, was under the gun to get checks out the door fast.

The Inspector General also noted that over time, the IRS has improved its controls and procedures to red-flag dubious claims, use third-party real estate data to spot noneligible claimants and to process claims more accurately.

In response to the Inspector General report, Richard Byrd, commissioner of the IRS’ wage and investment division, said the agency continues to seek to improve on its performance, has devoted more staff to the programs, and tightened procedures.

He also noted that the IRS has hardly been passive in the face of questionable or fraudulent claims for credits — conducting and closing 450,000 examinations of filings that yielded back $1.8 billion in revenues, including 225,000 amended returns that yielded $820 million.

We’ll never know the exact number of taxpayers who rooked the system with housing tax credit claims. But I think we know enough now to tell everybody with an interest in the subject — buyers, builders, Realtors and legislators — that next time around we need to require more extensive documentation for claims upfront.

And we need the IRS to look harder and longer before paying out the taxpayers’ money to just about anybody who asks for it.

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